The promotional products industry is
comprised of suppliers and distributors. The suppliers are the wholesalers who
manufacture items such as custom printed coffee mugs, pens, mouse pads,
calendars and other items business use to keep their name in front of their
clients. Distributors sell these custom products to businesses and usually
represent the product lines of many suppliers, thus offering businesses a wide
variety of items to choose from at different price levels. Since there are
millions of items available for custom printing, no supplier can manufacture
everything and therefore each distributor promotes various lines they feel can
best benefit their clients.
The promotional products
industry has trade associations which promote the overall needs of their
members. One organization, Advertising Specialty Institute, is an industry
supplier of compiled information, catalogs, trade shows and products that
suppliers and distributors may use in their business. Most promotional products
suppliers publish their ASI number on the bottom of their ad flyers and
catalogs to help their distributors sell their products without openly
identifying their sources to the end purchaser, but each ASI number points to a
supplier so the distributor can easily identify their sources. This also allows
the distributors to put their own names on the catalogs to protect the
distributor who is a vital link in the sales flow. It is the distributor who
makes the direct contacts and sales, and even builds a personal relationship
with the client. If you have seen such catalogs, you may have noticed the
letter codes in brackets next to each product. These ASI codes tell the
distributor what their profit margin is for selling the goods at list prices.
Distributors do not usually discount the list prices, but they can use the
letter code as their guide.
One industry association,
the National Association of Promotional Products Distributors (www.nappd.com)
is comprised of distributors only. Suppliers and distributors can join the ASI,
but suppliers can not join the NAPPD. Qualified suppliers can, however, become
members of the NAPPD advisory panel. The NAPPD is primarily concerned that the
traditional relationships between suppliers and distributors are maintained
since that relationship is the bread and butter of their members. If suppliers
start to sell directly to the customers, distributors will be driven out of
business which the NAPPD naturally wants to prevent.
The NAPPD maintains a membership and their web site
lists suppliers that have signed a pledge to only sell to distributors as well
as a list of distributors who have "violated our trust," meaning companies that
the NAPPD believe is selling to non-distributors, thus hurting the ability of
their members to make a living. At the end of the list of companies that sell
to non-distributors, the NAPPD writes "The association can not tell you who to
buy from anymore than it can tell these suppliers who to sell to, but why would
you support a supplier who has chosen not to support you?" This suggests the
recommendation of boycotting companies on that list, but does not order their
members to boycott nor does it place a condition of membership upon agreeing to
boycott.
One supplier on the list of companies to
boycott is Norwood Promotional Products, which has taken exception to the list
and filed an antitrust law suit in Federal Court alleging that the NAPPD, its
members and even non-members are conducting an illegal boycott and is injuring
Norwood by restraint of trade. Boycott Watch has reviewed the filing and
believes the lawsuit is frivolous and may just be harassment to either get
their name off the NAPPD list or possibly put the NAPPD out of business, which
may in and of itself constitute restraint of trade.
Boycotts and the
law:
There are two types of illegal boycotts in
the United States. First, persons in the United States may not join into a
foreign government sanctioned boycott of a nation that is friendly to the
United States. This is primarily aimed at preventing people from participating
in the Arab boycott of Israel since such activity would create de-facto US
foreign policy, which Congress reaffirmed as their domain when passing that
law. Second, unions may not boycott companies in order to force them to accept
a union, thus preventing intimidation of business owners by unions.
Boycott Watch findings:
In the Norwood
case, no condition of illegal boycott exists. This is not a case of the Arab
boycott of Israel nor is there union membership at issue. Norwood is suing for
antitrust law violations citing a boycott as the reasons for the antitrust
violations in a lawsuit with three counts: 1) violation of federal antitrust
laws, 2) violation of Indiana antitrust laws, and 3) tortuous interference with
business relationships and prospective economic advantage.
In the lawsuit, Norwood cites a completely legal
boycott effort as being illegal and their distributor/customers unwillingness
to buy from Norwood because Norwood took action to undercut the distributors by
selling directly to the end customers. According to the NAPPD, Norwood wants to
sell to the end customers and still sell to the distributors, and now Norwood
is upset that distributors won't buy from Norwood if Norwood undercuts them by
selling directly to the end customers. Boycott Watch believes that nobody
should be forced to buy from any company working against ones own interests.
That would be like suing the Catholic Church to cover the cost of abortion in
its health insurance, something the Catholic Church is religiously against.
The law suit quotes alleged comments in an email list
conversation, which the law suit called a chat room, detailing dissatisfaction
among Norwood customers. Legally, these comments are pure hearsay. First, it
was a private email list, not a chat room thus the allegation is flawed.
Second, the comments are third party quotes, and third, nobody can not prove
that those who typed the comments in, if the quotes are even accurate, actually
came from the people claimed to be making the comments. The email list being
quoted is not sponsored by the NAPPD, and list members may or may not be
members of the NAPPD, yet the lawsuit gives the impression that the chat room,
they term it, was among NAPPD members only.
The
quotes in the lawsuit are the opinions of the individual writers and are
completely within their constitutional right of freedom of speech. None of the
quotes come close to saying anything that would constitute antitrust; rather
the quotes discuss a legal boycott. Most interesting, the quote attributed to
NAPPD President Clyde Straub starts with a quote that is also on the NAPPD web
site "I wouldn't dream of telling a supplier who to sell to…" yet Norwood
is suing Straub, the NAPPD and various distributors for telling Norwood who to
sell to, thus Norwood is weakening its own case.
There is nothing illegal about boycotting a company
who you do not feel is working in your best interests, nor are chat room
conversations about your dissatisfaction illegal. There is also nothing wrong
with an association having requirements for an approved vendor or supplier
list. Unions, for example, have posted lists of companies they boycott and
recommend, and this is no different. The Good-Housekeeping Seal of Approval has
existed for many years recommending products to buy, and animal rights groups
have recommended stores not to buy from in the form of boycotts. There is no
difference here.
Antitrust would exist, for example,
is someone tells every gas station down a street not to buy a certain product
or from a certain supplier as a condition. That is not the case here. The NAPPD
asks the question "why would you support a supplier who has chosen not to
support you?" but does not tell its members that they must boycott in order to
be a member of the NAPPD nor does the NAPPD demand boycott with repercussions
for not boycotting, so this case does not fit the criteria of antitrust.
Promotional products distributors, not all of whom are members of the NAPPD,
are engaged in a perfectly legal boycott effort which negates count 1 and count
2 of the lawsuit. The third count relies on the first two counts to be valid
for it to be valid, and the first two counts are not valid legal claims. Count
three, therefore, is also invalid.
Norwood is
requesting a jury trial, damages from the boycott against them citing loss of
revenue due to the boycott and punitive damages. Boycott Watch expects the case
to be thrown out of court in a motion the defendants are sure to file
immediately. Boycott Watch believes that Norwood's attorney should have
reviewed the law in more detail before filing their lawsuit.
Boycott Watch believes that Norwood made another
mistake in fighting their customers by suing them for not buying from them. Not
only is that poor customer service, but it will also scare off future potential
and possibly existing customers. People do not like buying from companies that
may potentially sue them or companies that have a history of suing clients or
service providers. Norwood, therefore, may have caused harm to their own future
sales by filing their lawsuit rather than either trying to resolve the
situation with their customers or just ignoring it.
Boycott Watch is staffed by writers, not lawyers. We
are a news service. We do not profess or pretend to give legal advice in any
way shape or form, but we do know that basics of the law, and we can not see
any basis for the Norwood lawsuit. No illegal boycott exists here and the
lawsuit for antitrust quotes a recommendation for boycotts as its antitrust
basis and no demands, therefore no antitrust violations. The attorneys filing
this case must know this as it is basic law, and therefore Boycott Watch
believes the Norwood lawsuit was filed to intimidate the NAPPD.
Boycott Watch asks you: Would you buy groceries from
a store that sued your neighbor because your neighbor didn't buy food there
anymore? That's what Norwood is doing - suing their customers. We wonder how
long Norwood can stay in business with that attitude. |
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| Click Here to download the filing (570K
PDF) |
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